rovo's Market Journal -- 2011

[rovo]

Beerfan, I sold off a bunch of PSTR near the end of last year to lower my short term gains for tax purposes but kept 2,400 shares. I looked long and hard at the financials and I thought they would do OK. In this case OK would boost the stock price by at least 2X or 3X.

I really think you should always fund your Roth even if it means cutting back elsewhere because I don't believe you can make it up at a later date. Having the money working for you on a tax free basis is hard to resist. I was never able to use the Roth feature because of high income but I sure wanted to use it.

[IPAfan]

rovo,

Yeah, it's been a tough call. I've been overfunding the ROTH IRAs at the expense of everything else for so long that it's hard to start a business and continue contributing. I'll probably try to get both funded in 2011, but I'm going to be $2,500 short in 2010.

[rovo]

Beerfan, So how is you business going? Are you still doing drunk drivers and bankruptcies?

[soycapital]

Rove, Surprised to see HI doing so well today, heard anything about what is up? I still have a decent amount (for me).
Also; hey Beerfan I've bought some FRFHF, TTT, and PM. Not as much as I would like but not crazy about buying a bunch of stuff right here. You are one of the people I've seen write about these and ENH that I would like to buy also. Things can really get out of hand quickly as we saw in 08, I like dry powder but not for too long at Money market rates. Good hunting!

[IPAfan]

rovo,

Business is actually booming (knock on wood.) Mostly DUI and drugs. I've been investing in some advertising, and just tallied my figures. If I can keep up to the first Q then I can probably make 6 figures this year. I may try some forays into the civil arena. I'm trying to increase my business overhead every month so long as I can continue to grow the top line (so far I have.) Up to this point I've been doing everything in my business myself with some help from DW. I want to start delegating time consuming clerical duties to office staff so that I can handle more cases (or possibly add a bankruptcy or personal injury practice), and then advertise to get more cases.

Basically I want to invest in office staff and more advertisement. My overhead last year was almost nothing, about $500 a month. This year that's grown to about $2,000 a month, and that's without office staff or a big advertising budget. My advertising budget is up to about $10,000 annually right now. Last year it was basically nothing.

I think I'd like to grow my overhead to $10,000 a month + eventually if I can grow my top line correspondingly. I'd like to get an efficient office established, and then possibly start adding other practice areas like bankruptcy or personal injury (or just more criminal work) with minimal increase to overhead. Unfortunately I'm short on cash and have to put a lot of these plans on hold until I can safely take the risk of putting more money into the practice. If I hired an assistant and upped my advertising I

[rovo]

soycapital, I don't have any knowledge of what is driving HI upward. I think it was yclept that pointed out HI was mentioned by Crammer the other night as a "buy, buy, buy". Also "thestreet" has upgraded HI to Buy from hold near the end of last month.

The K-Tron division has been very busy in Q1 of this year but they were also busy in Q4 and it made little or no difference. Personally I'm beginning to lose patience with HI. The dividend is over 3% but I'm not a dividend player. I want growth and HI is not delivering growth. I've mentioned a few posts back that I have all of my HI holdings on the auction block along with some "blue sky" prices which are subject to change on a whim. I might hang onto a few shares but this stock will not be one of my major holdings going forward.

[IPAfan]

soycapital,

Hope I'm not leading you astray in TTT, FRFHF, ENH, and PM. I'm pretty confident with these investments, but obviously I will update if I change my views. I've certainly made my share of mistakes in the past, but overall have done quite well. I'm trying to avoid too much risk, and honestly that's why FRFHF makes me a tiny bit uncomfortable. I'm not happy with their underwriting, and therefore excellent investment returns are necessary for the business.

[livinincali]

I really think you should always fund your Roth even if it means cutting back elsewhere because I don't believe you can make it up at a later date. Having the money working for you on a tax free basis is hard to resist. I was never able to use the Roth feature because of high income but I sure wanted to use it.

If I could be sure the rules on roth's wouldn't change I'd use that option, but with the government deficits and 30 years before retirement I'm not willing to make that bet. Sounds great on paper also sound great for politicians to use it's for the greater good to change the tax rules on Roth's. If it comes to a reduction of social security/medicare or tax those roth accounts, guess which one is going to win. Traditional 401K/IRA is also a target but at least you've already received the tax benefit. It isn't a promise for a tax benefit in the future which may or may not be there.

[yclept]

Politicians might eliminate the Roth at some future point, but they won't change the status of pre-existing accounts -- they wouldn't dare to so long as we have the 2nd Amendment. The fact that it could be unavailable in the future seems to me to make it all the more important to get the maximum allowed into one now.
I suppose there's a slight possibility that income tax will be eliminated altogether in favor of a VAT or some other similar national sales tax. If that happens, obviously paying the tax on money put into a Roth will prove to have been a mistake (as compared to regular IRA, 401, etc. which in that scenario would have deferred income taxes eliminated). I won't be holding my breath in anticipation of the end of income tax! Methinks any sales or VAT initiated will be in addition to income tax, not in lieu of same.

[rovo]

Ford announced a recall of 1.2 Million F150 pick-up trucks for an airbag wiring harness problem. Here comes a hit to my Ford stock.

[yclept]

I saw that news article. So far your stock doesn't seem to be reacting very much to it, though it sounds like F is going to incur major cost to repair the problem. Maybe the market has determined this 14.5 area is a new base, though for the life of me, I don't see it from a fundamental point of view. I don't know how extensive Ford's part reliance is/was on Japan, but if I owned the stock, I'd be trying to find out as much as possible about their parts situation. I think that might be the medium-term bug-a-boo in analysis of auto manufacturers.

P/E 9.45
PEG 0.47
Price/Revenue 0.44
Price/Cash Flow 6.55
Price/Book (MRQ) NA
ROA 3.68%
ROE NA%
Current Ratio (MRQ) NA
Total Debt/Equity (MRQ) 0.00

I don't find anything compelling about a 3.68% return on investment. That's only about 1% more than a jumbo CD will get right now. Of course, a plant full of robots isn't something easily converted to a CD, so they're stuck with the horse they rode in on. The .47 PEG is attractive, but I'm always wary of the "G" part of the metric. I think I'd be particularly so now when the parts availability situation is nebulous and the upward pressure on fuel costs may be completely changing the consumer vehicle mix going forward. Wouldn't it be funny if they had to spend tons of money to fix a bunch of pick-ups only to see them roll on off to the wrecking yard because people can't afford to drive them?
Who knows, maybe in a year or two the only vehicles anyone will be able to afford to drive will be Honda's CNG Civic and Nissan all-electric Leaf (assuming Tesla hasn't got an affordable all-electric out by then).
Auto manufacturing just seems like a very unsettled sector of an unsettled market. I see a lot of risk, but don't see commensurate return. Methinks the auto sandbox is one that is getting visited by the neighborhood cats too often.

[livinincali]

Politicians might eliminate the Roth at some future point, but they won't change the status of pre-existing accounts -- they wouldn't dare to so long as we have the 2nd Amendment. The fact that it could be unavailable in the future seems to me to make it all the more important to get the maximum allowed into one now.

Why would the second amendment matter at all. Probably less than 20% of the population has a roth and the reason for eliminating the tax break on the roth would come from the government being broke and wanting to redistribute that money. Like I said you'd have to worry a lot more about guns from people losing a social security or medicare benefit than you would from people getting their Roth taxed. Most people with a roth would probably suck it up and take it, if they have a roth they certainly aren't starving. Our government lies all the time, why would you trust them with roth rules when they are already trying to break public sector pension promises. I have no idea how roth's will end up in the future and they may be fine as they aren't a huge money target, but when you put your money in a roth you're putting your trust in our lying government.

[yclept]

Why would the second amendment matter at all.

The Second Amendment is protection for the ultimate recourse of the people against the government, should it become necessary.

[livinincali]

Ford announced a recall of 1.2 Million F150 pick-up trucks for an airbag wiring harness problem. Here comes a hit to my Ford stock.

From a technical perspective Ford is pretty neutral right here. The bullish possibility is it bases in the 14-14.50 and 13.70-14 holds up as support. Breaking through 16 would confirm a bullish scenario. The bearish possibility is it's worked off the oversold conditions and hasn't made much progress in terms of price. It looks like it's rolling over again on the daily so we need to watch for support to hold at 13.70-14. If that support breaks the target would be somewhere in the 10-11 range as the next major support level.

[rovo]

The stock market sucks and I'm bored so I'm going off topic.

I've been going to the field every day this week as it was time flip the compost piles and do a general post-winter clean up. The compost is getting out of hand. Anybody need some? Sometimes people really piss me off. I let a family (guy and son) hunt my property in deer season. I would think they would be respectful of my property but I'm wrong. Empty Gatorade bottles and misc. trash beneath their deer stands. I cleaned it up but they should have policed it before I had to. Also, they put a deer stand in my favorite tree. This tree was to be the backyard tree when I was planning to build there. I think I'm about to have a falling out with this neighbor.

I put the roto-tiller on the tractor as I'm thinking of tilling a portion of the field. There are a lot of concrete block pieces just below the surface and the roto-tiller does a fine job of digging them out. Most of the field has already been cleaned but there is still about 1 acre with block in it. The block is the residue of chicken coops which were removed before I bought the property.

I had a wisdom tooth cut out last Friday so I can blame any future stupid market action on not being wise. This was the last wisdom tooth for me.

I got a call from the tax accountant yesterday as he was finished with my returns. As expected, ouch. Transferred big bucks this morning so I'll just make the deadline on Monday.

I had to put some diesel fuel in the tractor today. $4.00 per gallon. Are they kidding me? It wasn't too long ago I could fill the sucker for $8.

[yclept]

I had to put some diesel fuel in the tractor today. $4.00 per gallon.

Count your blessings. I don't use diesel, but last price I saw a day or two ago was about $4.70/gal. It used to be (like for almost all of my life) that diesel was cheaper than any grade of gasoline. Now it's more expensive than the premium stuff. I've seen it in that situation several times over the last 10 years or so, in fact I'd say for the last 10 years it's often the most expensive grade of fuel. Wonder what that's all about.
And as to the guy leaving bottles and such, I'd definitely be telling him to hunt elsewhere next year. If he got a buck late in the day, was he planning to drag it up to your front porch and gut it out there so he'd have light?

[mtntigger]

Whatsa matter, rovo? Is Ms. rovo out of town again? Do you need a hug?

I can blame any future stupid market action on not being wise.

Should I say it? Nah, way too easy and you may smite me.

[yclept]

"Perhaps another ten to twenty years to get to the point where someone would have a hard time claiming to not be aware."

That'll be just about the time the third-world suits will be really picking up steam. I'll bet the lawyers in China, India, South America will be as keen to sue tobacco companies as those in the US were. And they'll have all those settled and adjudicated cases from the US to use for precedents.
One of the biggest complaints the miners trapped so long in Chile had was that after the first supply bores reached them, the government administrators wouldn't send them cigarettes -- primarily because the air down in the mine was already considered too foul! Sounds like addiction to me!

articles.moneycentral.msn.com/Investing/CompanyFocus/TheMarlboroMenGoGlobal.aspx

I can't see buying stock of companies that kill people. If the Nazis had sold stock in Treblinka, Sobibor, Belzec, Chelmno, Auschwitz, and Majdanek, would they have been conscionable investments?

[IPAfan]

"I can't see buying stock of companies that kill people. If the Nazis had sold stock in Treblinka, Sobibor, Belzec, Chelmno, Auschwitz, and Majdanek, would they have been conscionable investments?"

Good tobacco companies perpetually return capital to shareholders. Therefore, buying a good tobacco stock doesn't provide any financial support for the company producing the profits.

Someone is going to buy the stock, the question is whether it's a good investment or not. Altria Group has been the best performing US stock over 50+ years including dividend reinvestment.

PM earns an absurd 130% ROE, and has a huge market to grow into. That's why PM/MO are the only investments I have that trade substantially above asset value. PM is IMO one of the very top earnings streams in the world, and worth buying at a market multiple.

[IPAfan]

ENH estimates Japan losses at $125 million. This means along with the New Zealand EQ the losses are less than 10% of book value. Depending on investment performance and the rest of the insurance portfolio ENH is still probably trading at most at a small premium to book value. Again, the company will have years with negative BV with large catastrophes, but hopefully the tsunami will lead to a harder market.

[rovo]

Intel posted some very respectable earnings last night and surged upward in after hours trading. Expectations were low because of the reported slow down in PC sales but they beat the numbers on both the top and bottom lines. The claim is that server sales filled the gap per the talking heads.

Semiconductors have been sucking wind lately based upon the same assumptions of poor PC sales and may reverse the trend after the INTC report.

Apple reports tonight and the rumors are of lower than expected sales of the IPad2 and higher than expected sales of the IPhone. The lack of IPad sales is being blamed on a shortage of units to sell. If true, I'd rather have shortages than low demand. AAPL is trading up $4.00 this morning after yesterday's $6 run-up.

Also, QQQ is responding well this morning based upon the tech sector doing better than predicted. The Qs are trading up $1 or +1.6%.

I have holdings in AAPL, SOXL (3X Semiconductors), and TQQQ (3X QQQ). It could be a day of nice gains for my portfolio.

[mtntigger]

Intel posted some very respectable earnings last night and surged upward in after hours trading. Expectations were low because of the reported slow down in PC sales but they beat the numbers on both the top and bottom lines. The claim is that server sales filled the gap per the talking heads.

Yay! I bought some INTC last week at 19.5, but I didn't want to jink it on the game.

[rovo]

Intel CEO was on CNBC this morning and gave some very impressive statements about INTC. I placed a buy order for INTC this morning at $20.00 but I don't expect it to fill since it is trading in pre-market at $21.25. One never knows what orders are out there on the sell side with the sellers not paying attention to their open orders.

Gross margins of 60% for Intel. Huge. Also a dividend of $0.72 per year.

ETA: I'm out of here for a few hours so you guys take care of the market for me.

[rovo]

Very nice pop on the port today with every holding showing green. SOXL was up 12.81% for the day.

Waiting for AAPL results and in the meantime QCOM beat earnings by a convincing amount and the Qs are responding nicely. QCOM is trading +$2 in the after-hours.

AAPL expectations are $5.37 per share earnings. The number is $6.40 and they also beat revenue expectations by a nice margin. Trading up about $7 per share since the close.

[rovo]

It will be interesting to see if there is any follow through tomorrow. I know there was a lot of doubt about this quarter's earning reports and i think some or many of the those doubts have been put to rest. There have been some bad reports (CREE) but these are to be expected. It is the notable stocks that move markets, the likes of INTC, AAPL, CAT, QCOM, and actually most of the DOW stocks.

We've been pretty much "marking time" since the middle of February, so is it time for another upward move? No one knows with any certainty but my money is on further gains in the overall market.

The dollar is getting killed and this can only help the international companies when they convert local currencies into dollars.

[mtntigger]

I know there was a lot of doubt about this quarter's earning reports

No kidding! Intel and other PC company news were absolutely dismal last week (which is why I didn't say anything).
I sure hope we get another uptrend, but I betcha yclept is gonna come around and mention May 1 any time now.

[yclept]

but I betcha yclept is gonna come around and mention May 1

Actually one generally wants to capture the trend where the first few days of each month are up. So it would be about May 4 or 5. But then too it's often advisable to watch the MACD for indices and leave a bit early if it crosses negative, which it did the middle of April (i.e. about a week ago).
This market doesn't pass the "sniff" test for me, for whatever that's worth (believe me, not much).

[rovo]

I'm getting old and the memory isn't as good as it used to be. The significance of May 1 is what?

[mtntigger]

yclept once recommended the book "Riding the Bear" to me. In that book, it mentions a seasonal trend with May 1 (or thereabouts) being the beginning of the summer's bear market.

[2kids10horses]

rovo,

I wonder if the iPhone tracking log scandal hurt the follow through on the stellar AAPL earnings report?

I don't care if anyone follows where I go, but I know there are some that would absolutely freak out. I'm hoping it was just an oversight on Apple's part, and they will remove it on the next iOS release. If they do, then I think it will just be something we can all laugh about, like the time INTC made CPUs that couldn't divide!